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The Role of Storage in Commodity Markets: Indirect Inference Based on Grains Data

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  • Gouel, Christophe
  • Legrand, Nicolas

Abstract

This paper develops and estimates a rational expectations storage model with rich dynamic features. The model incorporates elastic supply, long-run demand and cost trends, and four structural shocks. It is estimated by indirect inference using a linear supply and demand model as an auxiliary model. This approach deviates from the common practice of estimating storage models only on prices and allows all parameters to be estimated. The estimation is carried out on a market representing the caloric aggregate of four basic staples: maize, rice, soybean, and wheat. The results show that our extended storage model is consistent with most of the moments in the data, including the high price autocorrelation which is the subject of longstanding debate. However, it fails to replicate the strength of the negative correlation between consumption and price.

Suggested Citation

  • Gouel, Christophe & Legrand, Nicolas, 2021. "The Role of Storage in Commodity Markets: Indirect Inference Based on Grains Data," 2021 Conference 316404, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nccc21:316404
    DOI: 10.22004/ag.econ.316404
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    Cited by:

    1. is not listed on IDEAS
    2. Nicolas Legrand, 2023. "War in Ukraine: The rational “wait‐and‐see” mode of global food markets," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(2), pages 626-644, June.
    3. Christophe Gouel & Nicolas Legrand, 2025. "The role of storage in commodity markets: Indirect inference based on grain data," Quantitative Economics, Econometric Society, vol. 16(2), pages 705-747, May.
    4. Gouel, Christophe & Ma, Qingyin & Stachurski, John, 2024. "Interest rate dynamics and commodity prices," Journal of Economic Theory, Elsevier, vol. 222(C).

    More about this item

    Keywords

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    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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